Apollo’s Moonshots: Pendle Finance launches on Avalanche, and Aave to go cross-chain
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David Angliss, an analyst with Australia’s leading cryptocurrency investment firm, Apollo Capital, shares the fund’s weekly take on what’s happening in the fast-changing and volatile cryptocurrency space.
A future yield protocol that Apollo Capital has described as one of the most interesting projects in DeFi is migrating from the congested and expensive Ethereum network to Avalanche, its cheaper and speedier competitor.
Pendle Finance launched on AVAX on Thursday and had attracted more than US$10 million in total value locked (TVL) in its protocol in less than 24 hours.
“It’s still functioning as an app on Ethereum, but you’ve got the option to toggle between blockchains,” David Angliss said.
Pendle allows users to split interest-bearing tokens, such as Trader Joe’s xJOE token, into tradeable yield tokens (YT) and ownership tokens (OT). This way a crypto degen who is bullish on the Trader Joe decentralised exchange platform could stock up on xJOE YT, essentially placing a leveraged bet on Trader Joe with no liquidation risk. Selling the xJOE yield tokens would similarly allow xJOE holders to hedge their risk.
Pendle isn’t a huge project, with just $25 million in overall TVL. (There’s more than 50 DeFi projects with over US$1 billion in TVL, according to DeFi Llama. Stablecoin swap marketplace Curve leads with $20.9 billion).
But still, Pendle’s move away from Ethereum should worry supporters of the No. 2 cryptocurrency.
“The key reason why they needed to move to Avalanche was obviously the gas was quite expensive” on Ethereum, David Angliss told Stockhead.
For crypto newbies, Ethereum users need to pay gas to Ethereum miners, but lately the network has been so clogged a transaction can cost US$100 or more in gas fees.
Pendle says it’s also introducing a “zap” functionality that’ll consolidate several different steps into one process, saving gas fees. A multi-step process that might cost Ethereum users $800 in gas (!) will cost Avalanche users $2, Pendle says.
“Projects that are over-encumbered on Ethereum right now, they’ve got three choices,” Angliss says.
“They can wait out ’til Eth 2.0, which will be next year, mid-next year, but who knows? No one really knows when it’ll be fully rolled out. That’s probably the least favourable scenario.
“Another option would be to migrate to another EVM chain,” Angliss continued, referring to the Ethereum Virtual Machine, the coding language used by Ethereum smart contracts.
The third option would be to move to an Ethereum layer 2 scaling solution such as Polygon, Arbitrum One or Optimism, Angliss said.
“But launching on another layer one’s probably the most attractive right now. Because that ecosystem’s very new. And yeah, there’s just a lot of activity.”
Meanwhile, blue-chip DeFi project Aave is introducing new features in version 3.0 of its lending and borrowing protocol, including a way for assets to seamlessly flow between different blockchains.
“They’ve got a portal, which will be like a mega-bridge between all these ecosystems, Polygon, Avalanche, Solana, Ethereum, Fantom, zkSync, Optimism, Harmony and StarkNet. So they’re all going to be interconnected, assets are going to be able to flow freely through the bridge Aave is setting up,” Angliss said.
“You could see things like putting up collateral on one chain, and receiving a loan on another chain.”
Angliss predicts that the portal will be massive, given how successful other bridging services such Anyswap, Celer Network, Hop Protocol and Synapse have been.
The bridge is an important step towards greater capital efficiency, Angliss said.
He agreed with this reporter’s suggestion that Aave’s portal and Pendle Finance’s move to Avalanche were a sign of trouble for Ethereum.
“I just think people are fed up with paying so much gas,” Angliss said. “It’s just not a viable chain right now.”
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.